Securities Litigation Measure Nears Passage in the Senate

By NEIL A. LEWIS

Published: June 28, 1995

WASHINGTON, June 27—
The Senate tonight moved swiftly toward a final vote on legislation that would make it far more difficult for investors to sue corporations and stockbrokers for securities fraud.

Opponents of the measure tried repeatedly today either to slow the bill or to modify its effects but were beaten back at every turn. The legislation is expected to pass as early as Wednesday morning with support from both Democrats and Republicans.

The House has already passed a similar measure. The Clinton Administration has not yet taken an explicit position but has suggested that some parts of the legislation are necessary.

One principal area of contention over the last several days of debate has been provisions that would shield corporate officers, and others who make predictions about a company's prospects, from stockholder fraud suits when their assessments prove unfounded and the stock price drops precipitously as a result. The bill would provide a "safe harbor," in which those who made such predictions could not be held liable under most circumstances.

The measure's opponents, chiefly Senator Paul S. Sarbanes, Democrat of Maryland, argued that allowing company executives, stockbrokers and accountants, among others, to make such statements free of liability would increase corporate irresponsibility. Mr. Sarbanes said small investors who had been deceived would be left with little recourse.

But supporters of the bill like Senator Pete V. Domenici, Republican of New Mexico, said that at present the fear of being sued prevented corporate officers from making predictions that would be useful for investors.

After lengthy debate, the Senate beat back two Sarbanes-sponsored amendments that would have changed the safe-haror provisions of the measure. The main amendment would have deleted the safe-harbor provisions entirely, instead leaving the task to the Securities and Exchange Commission. Mr. Sarbanes said the matter was too technical to be included in legislation and should rather be left to the S.E.C. to deal with in regulations.

Arthur M. Levitt, the S.E.C. chairman, has objected to the safe-harbor concept in the House and Senate bills alike and has asked that the matter be left to his agency. Nonetheless, the Senate easily defeated Mr. Sarbanes's proposal, 56 to 43.

Photo: If all goes as planned, the Senate today will pass legislation that would make it much harder for stockholders to sue companies in which they invest. The bill's chief sponsor, Senator Alfonse M. D'Amato of New York, declared yesterday that frivolous lawsuits were "making it difficult for companies to raise the capital needed to fuel our economy." (Stephen Crowley/The New York Times)